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Return to: Home > News > Regulation > EY ShinNihon will audit Toshiba’s corrected accounts… while under investigation

EY ShinNihon will audit Toshiba’s corrected accounts… while under investigation

The Japanese Institute of Certified Public Accountants (JICPA), a self-disciplinary professional body, has launched an investigation into EY ShinNihon's past audits of Toshiba Corp, while the firm will audit the company's corrected accounts.

Toshiba Corp is accused of having overstated its profits by $1.2bn since 2008 according to an investigation by an independent commission. Making it Japan greatest accounting scandal since Olympus in 2011.

The report suggests auditors EY ShinNihon, member firm of EY Global, were given false explanations of the company's position and that it would have been difficult for them to detect the malpractices.

"It is hard to understand the nature of the difficulties that the auditor would have encountered," CFA Institute director of financial reporting policy Matt Waldron wrote in a post on Market Integrity Insights. "Given the sheer size of the misstatement, it begs the question: Why was the auditor blind to the accounting irregularities?"

The independent commission's revelations provoked a mass resignation of Toshiba top management and the Japanese company has published an action plan to correct past accounting irregularities. However, according to Toshiba's action plan, the corrected amounts will be audited by EY ShinNihon.

"The very auditor under whose watch the irregularities occurred," Waldron wrote. "Having another audit firm review the corrections seems a more reasonable strategy given what Ernst & Young ShinNihon missed, for whatever reason, over the span of six years. "

At the time of publication, EY Global and EY ShinNihon were not available for comment.

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